by Richard Lee
Countering previous notions of ?above trend? growth, Canadian retail sales figures were released to the downside during the session. ?Disappointing expectations of a 0.1% advance, retail sales figures actually fell by 0.4% in June. ?The ex-auto figure additionally dropped by 0.4% in the month and countered a 0.2% gain in the prior month, according to Statistics Canada.
Now, although today?s release is likely to be taken with a grain of salt by some, there are some negative takeaways from the report. ?Upon initial review, the monthly report could be considered a one off or isolated incident. ?However, the indication of weaker consumer demand for the month falls in line with other more pessimistic surveys in key areas like building permits, wholesale activity and especially employment. ?Specifically reviewing the report, notable declines in household spending led the way in pushing final survey findings lower. ?Department store sales dipped by almost 3%, while gasoline stations witnessed a 1.3% dip in receipts. ?This means that consumers are pulling back on spending, usually at a time when consumption should be higher. ?Growing economy should equal growing sales.
Unfortunately, the bevy of dour data is counteracting previous statements and forecasts by policymakers at the Bank of Canada. ?In an interview earlier this month, BOC Governor Mark Carney noted that the world?s tenth largest economy was ?firing on all cylinders? and that a withdrawal of stimulus may be needed. ?To market participants, this translated into an increase in benchmark interest rates. ?For the record, prior to the report, expectations remained in the slightly above 40% range that Carney and company were set to increase rates by 25 basis points in the first quarter of next year. ?This is compared to other central banks in Asia and the US, which are still searching for ways to increase monetary stimulus in their respective economies. However, questions now remain as to whether or not the Canadian economy truly is churning higher at a sustainable rate ? and whether a rate increase is really necessary.
The surfacing notion should make things a bit choppy for the USDCAD pair in the short term, even though the overall bearish trend continues to remain intact. ?The USDCAD major pair jumped on the announcement of the report, rising through 0.9910 resistance established overnight ? recently bouncing from support via the 0.9850 figure.
Tags: Bank of Canada, Canadian Dollar, Foreign Currency, Foreign Exchange, Loonie, Mark Carney, usd/cad
Source: http://www.onlineforextrading.com/blog/cad-retail-sales-bucking-growth-trend/
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